WesCorp’s Legacy Losses Outpace Other Corporates

According to legacy asset loss estimates provided to Credit Union Times by the NCUA, investments made by Western Corporate FCU are generating far more losses than those that were made at other failed corporates.

As of year-end 2012, WesCorp’s estimated losses were $5.7 billion, representing 84.4% of the nearly $6.8 billion in total estimated legacy asset losses. However, according to a chart provided by the NCUA, the corporate formerly located in San Dimas, Calif., contributed just 39% of total legacy assets.

That’s in stark contrast to the four other corporates that had their investments seized by the NCUA and used as underlying assets for more than $17 billion worth of NCUA guaranteed notes issued in 2011.

U.S. Central FCU’s assets show the most dramatic loss discrepancy. The former Kansas City-based corporate’s $625 million worth of estimated losses as of year-end 2012 make up just 9.2% of total estimates losses. U.S. Central assets totaled 43% of all legacy assets.

Both Members United FCU and Southwest Corporate FCU legacy assets also contribute fewer losses compared to the size of their portfolios. As of 2012 year-end, Members United legacy assets were estimated to produce $214 million in losses, which represents 3.15% of total losses. The corporate’s legacy assets represent 9% of the total. Southwest Corporate posted $149 million in estimated losses as of Dec. 31, 2012, for 2.2% of total losses. The Plano, Texas-based former corporate contributed 8% of total legacy assets.

Only the former Constitution Corporate FCU’s legacy asset losses are on par with the size of its portfolio. The failed corporate, once headquartered in Wallingford, Conn., had $72 million in estimated losses at 2012 year end, a bit under 1% compared to the total. According to the NCUA, Constitution’s assets make up approximately 1% of the total legacy asset portfolio.

Following a twice-annual review, the NCUA reported in March that the highest estimated loss amount declined by $900 million, due to improvements in legacy asset performance. Although the NCUA reported improvements for each corporate’s legacy assets, WesCorp’s portfolio improved far less than others.

Between year-end 2011 and year-end 2012, WesCorp’s estimated losses dropped by $216 million, representing a 3.6% reduction. In comparison, U.S. Central’s estimated losses decreased by 31% during the same period, dropping from $906 million to $625 million.

From 2011 to 2012, Members United saw a 28% decrease in estimated losses, Southwest Corporate’s estimated losses decreased by nearly 37%, and Constitution Corporate’s legacy assets saw a 22.6% decrease in estimated losses.

Federally insured credit unions will pay between $1.6 billion to $3.9 billion in remaining corporate assessments, and have paid $4.1 billion toward corporate stabilization costs since 2009. The NCUA has estimated the 2013 corporate assessment will be between 8 and 11 basis points. The exact number is expected to be revealed during a month board meeting sometime this summer.